By Nesil Staney
Prateek Agrawal, MD & CEO, Motilal Oswal Asset Management Company, believes valuations of large–cap stocks are at neutral levels, implying that future returns are likely to align with earnings growth. Agrawal tells Nesil Staney Nifty returns over the next two years are likely to be driven by earnings growth adding that the expected lower cost of capital could potentially support some valuation expansion. Excerpts:
How do you view current large cap valuations?
Valuations are presently at neutral levels, implying that future returns are likely to align with earnings growth. We continue to believe that markets follow earnings over time. In this context, identifying companies with strong and consistent earnings is crucial. In a fairly valued market, selectivity and discipline are likely to be key factors in aiming for better long-term outcomes.
What’s your view on the Nifty over the next two years?
We believe Nifty returns over the next two years are likely to be driven by earnings growth. With valuations at fair levels and interest rates expected to decline, the cost of capital could reduce, potentially supporting some valuation expansion and aiding market performance.
What is your take on SEBI potentially increasing mutual fund limits in F&O?
An increase in MF participation in F&O is seen as a positive development. It can enhance liquidity and scalability and aids price discovery by accommodating both positive and negative market views. For us, futures are a strategic tool to enter or exit positions more efficiently, potentially minimizing impact costs. This flexibility may support better execution in large portfolios.
What could be the impact of SEBI raising MF exposure to REITs and InvITs?
While we are primarily equity-focused, REITs and InvITs could play a complementary role in hybrid products like BAF and MAF. These instruments may offer income and diversification, especially in yield-seeking portfolios.
Which themes are currently attractive for stock-picking?
We focus on earnings growth and believe that certain emerging sectors offer growth potential beyond index levels. These include new-age tech, EMS, defence, renewables, luxury consumption, NBFCs, GLP-1 in pharma, and capital market participants like mutual funds and digital brokers. Beneficiaries of the China+1 trend also appear to have strong potential. These are long-term themes with structural tailwinds.
What are your views on consumption, inflation, and rate cycles?
Consumption momentum appears healthy, particularly in underpenetrated categories like travel, tourism, telecom, durables, and luxury. India’s rising per capita income is contributing to growth in discretionary and premium consumption. Well-penetrated segments are witnessing relatively slower growth. We view this shift as a part of a long-term structural trend.
Are you planning new fund launches or consolidations? How are you expanding your retail base?
We are considering merging our Multi Asset Fund with our Balanced Advantage Fund. We have added nearly 90 lakh investor folios and observed rapid customer growth, particularly via digital channels and new product launches. We have doubled our team and expanded to over 70 offices nationwide to increase distribution.
Your large cap fund has delivered a stellar 26% CAGR, outperforming other funds since inception
Our fund’s outperformance stems from a disciplined approach where we focused on identifying quality businesses and holding them for the long term. While large-cap funds typically offer stability, we’ve concentrated on well-established companies with strong earnings, scalable models, and prudent capital allocation. These companies, especially in sectors like financials, autos, and select private enterprises, have supported earnings growth and demonstrated resilience. What has contributed to the fund’s performance even within the large-cap space is the bottom-up, high-conviction stock picking, free from chasing momentum.